Important step towards capital deployment but excitement dwindling. CapLand recently announced its plan to deploy the capital it raised during its Rights issue in Feb. Out of the proceeds of S$1.8b, S$1b will be deployed to 3 of its business units- CapitaLand China (S$500m), CapitaLand Vietnam (S$300m) and Ascott (S$200m). Although this is one step closer towards capital deployment, we think that the initial excitement over the potential value creation from the capital deployment is now dwindling as the strong recovery in the property markets in Singapore and China has now lowered hopes of distress acquisitions.
Maintain HOLD. Our RNAV estimate has been lowered marginally to S$3.72 (previously S$3.73) after lowering our estimated profit contribution from The Interlace. We continue to peg our fair value of CapLand at par to its RNAV and thus deriving a fair value of S$3.72 (previously S$3.73). Since our last report on 30th July, CapLand's share price had fallen closer to our fair value. Price looks fair but value has not yet emerged. We maintain our HOLD rating on CapLand. We continue to like CapLand's growth potential in developing countries like China and Vietnam but advise investors to wait to enter at more attractive valuation of at least 10% below our RNAV estimates for a better margin-of-safety. Investors may want to switch to other value property developers like UOL Group (BUY; FV: S$4.07) that is trading at 21.8% discount to our RNAV estimate.
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